STRATEGIC PLANNING TOOLS FOR FUTURISTS

 
 
 

STRATEGIC PLANNING TOOLS FOR FUTURISTS

Article by Herb Rubenstein
CEO, Herb Rubenstein Consulting

PUBLISHED IN FUTURES RESEARCH QUARTERLY, FALL 2000
WORLD FUTURE SOCIETY

Introduction

The worlds of futurists and strategic planners are converging. Jack Pellicci, Senior Vice President and E-Business Thought Leader of the Oracle Corporation, recently stated that Oracle uses the calendar year for planning, but a year at Ora-cle only lasts “three months.” We get the sense that “long range” futures planning today usually spans out five years or ten years at the most. Edith Wiener, in her luncheon address at the 2000 World Future Society international convention, stated that “time compres-sion” is one of the ten top new social trends that hu-mans will have to address during the next decade. Today, the time horizon for strategic planners is the next quarter to five years out and the time horizon for many futurists is being scaled back from the twenty to thirty year view to the three to five or ten year view. This convergence of time frames between strategic planning and future studies sug-gests that futurists should consider using some of the key tools that strategic planners have tradition-ally used in their work. At the conclusion of this article, I will show how futurists can incorporate new informa-tion technologies to augment these basic strategic planning tools.

This “time compression” is not exactly a new phenomenon though it is only now beginning to become pervasive throughout modern industrialized societies. The movie industry has been living under compressed time for years. A feature film which spends 180 million dollars in fewer than nine months of shooting only has two weeks from the date of its release to become a blockbuster success in the open market. Similarly, Richard Branson of Virgin Records states that his record stores sell 70% of newly released CDs within two weeks after their release. Some e-business thought leaders have predicted that the fate of new products in the future will be sealed within three days of their release, since consumers and expert product re-viewers will post their views over the internet and the product will live or die based on these very early returns. In internet time, there are no re-counts.

The convergence of the worlds of “long-range” forecasting and shorter-time-frame “strategic planning” has facilitated a huge growth in the “competitive analysis” industry. Two years ago, venture capitalists were satisfied if a business plan presented in careful detail every competitor the company faced, the competitors’ current sales, business models, profit or loss figures, and description of their management teams and discussed the competitors’ near term prospects.

Today, some diligent venture capitalists are demanding that business plans include not only this basic information about competitors, but also a thorough analysis and prediction about where each competitor will be in the market one year out or further in the future. In order to conduct excellent strategic planning for compa-nies, non-profit organizations, educational institutions and government agencies especially in markets and subject areas that are being rapidly transformed by technological innovations futures oriented strategic planning tools using new information technologies are now becoming essential.

The Tools

The ten future-oriented strategic planning tools presented below are presented in a particular order or syntax. Our research, docu-mented in the book, Break-through, Inc.—High Growth Strategies for Entrepreneurial Organizations, has shown that these tools build on one another and the order in which these tools are deployed can dramatically affect the quality of the strategic or futures plan that is created in the process. While many of these tools have been in the literature for some time, the goal here is to present several additional tools and review existing tools in an easy-to-use format for futur-ists. As well, there are certainly other strategic planning tools worthy of being included in this list and other writers may choose to ex-plain them. The strategic planning tools reviewed in this article should be de-ployed in the following order:

  • Gap Analysis
  • Root Cause and Defining Moments Analysis
  • Competitive Analysis
  • Porter’s Five Competitive Forces plus Grundy’s
    Industry Mindset
  • Flexibility/Innovation Analysis
  • Political, Economic, Social and Technological
    Forces Analysis
  • Stakeholder Analysis
  • Growth Drivers Analysis
  • Scenario Planning and Visualization
  • Strength, Weaknesses, Opportunities and Threats Analysis.

The essential argument in favor of futurists using systematic strategic planning tools is not only that these tools will shed light on subjects of concern to a futurist, but that these strategic planning tools also act as catalysts to generate, enroll, lever-age, and even create for organizations resources that otherwise would not have been available to them. The complemen-tary goals of using these tools are to more accurate-ly predict the future, better prepare for the future and, possibly most impor-tantly, improve an organization’s ability to achieve its desired future, (i.e. impact the future). For the futurist who is seeking to understand the near- and medium-term future more clearly, several of these tools will guide a futurist’s scope and method of inquiry to yield information which may not be discovered through many of the tools that futurists now use.

Tool Number 1—Gap Analysis

A Gap Analysis has three parts:

  • Identify the present situation with clarity and gain an understand-ing of the history that has led to the current situation;
  • Identify the desired or expected future;
  • Determine by when this future can or will be realized.

The Gap Analysis is usually done with a particular organization in mind (a “client”). Using a “client” as the unit of analysis bridges the worlds of “futures studies” and “strategic planning” with its advocacy nature. One informed method of conducting a gap analysis is to select 10-20 questions that the futurist/strategic planner believes are important to the client organization, industry or subject of the futures-oriented study and solicit short, structured answers from knowledgeable people regarding current reality and some future, expected or desired goal in a particular time frame. While answers will differ from different sources, careful qualitative analysis of the structured answers will provide useful information regarding the “gap” and point directly to alternative futures that people expect or desire and give insight into the time frame when these future oriented states can be expected to be realized. In working with clients, the futurist should focus on those types of “gap” questions that can help pinpoint how the client, be it an organization or particular sectors in an industry, can play a significant role in bridging the gaps that are identified.

Tool Number 2—Root Cause and Defining Moments Analysis

The Root Cause Analysis can also be performed by surveys, focus groups and more quantitative analytical approaches. This analysis focuses attention on the “why” question and becomes most useful for futurists when it is used to help formulate and test key assumptions and beliefs regarding when a particular result or set of results might occur in the future. Often, a “tree-like” graphic structure is used to lay out the assumptions at the bottom of the diagram and the end results at the top of the tree.

A new analytical tool created by the author is the “defining moments” analysis. This tool is modeled after the “critical incident technique” in social science research developed by the American Institutes for Research and patterned after Professor Joseph Badaracco’s book, Defining Moments. The “defining moments” analysis focuses on such industry-wide events as “inflection points” and more particularly on situations within an organization’s history when some key decision was made or invention was created that reflected the organization’s core values or demonstrated the true character of that organization or its key personnel. For the futurist, the defining moments analysis need not only analyze the past. The futurist and the strategic planner can use this analytical technique to investigate a very important question, “What future defining moments in an industry or in a particular organization do people see on the horizon or want to bring about?” Through surveys, focus groups, brainstorming sessions and board meetings or broader discussions with stakeholders, the proper framing of this question can assist organizations identify with great precision forks in the road they will face and actually help them make decisions about how they will respond to “future-defining moments” well in advance of being faced with the decision. For the futurist, this analytical approach grounds key assumptions and forms a basis of knowing which way an organization or industry will move far in advance of the time when it is actually faced with a key decision.

Tool Number 3—Competitive Analysis

Organizations are not islands, nor are industries. To know where an organization or industry is today and will be in the future, it is essential for the strategic planner and the futurist to understand the competitive environment, (the “rugged landscape”) that the organiza-tion or industry faces today and will likely face in the future. Competitive analysis is an important subset of “environ-mental scanning.” In order to conduct a thorough competitive analysis, a futurist must define an organization's/industry’s competi-tors in the broadest sense.

Several key questions to ask in conducting a thorough “competi-tive analysis” include:

  • Who are and have been your competitors (think very broadly)?
  • What and how are they doing now and have done in the past several years?
  • What do you think they will do in the next several years? Why?
  • How have they changed/improved/declined in the past several years?
  • How do you think they will change/improve/decline in the next several years?
  • What new technologies will impact the competitive landscape over the next several years and how?

From an organization’s perspective, one goal of conduct-ing a competitive analysis is to identify the organization’s competitive advantages (and figure out a way to build on them) and competitive disadvantages (and figure out a way to minimize them or their impact). The American Society for Training and Development (ASTD) in its red “Strategic Planning Book” states: “Competition is an Opportunity.” Certainly performing a thorough competitive analysis using Porter’s Five Forces described below plus the factors identified above can identify actions by competitors well before they become trends and before general environmental scanning tools might discover them.

Tool Number 4—Porter’s Five
Competitive Forces Plus One

Michael Porter has developed a useful frame-work for analyzing a company’s immediate and future competitive environment from the customer’s point of view. Porter is known for his generic strategies (cost leadership, differentiation and focus) which have guided many strategic planners for years. His five competitive forces are:

  • Entrants of other companies or competitive organizations
  • Substitutes—better, cheaper products, alternative
    products that reduce demand
  • Buyer power (i.e. of customers)—Reduction of loyalty, increase in group purchasing, buyers becom-ing sellers to compete with buyers, better or less expensive informa-tion available to buyers
  • Supplier Power—when supplies of one or more elements in the supply chain diminish and price goes up or when a company has such a large share that it can dictate the terms of the deal
  • Competitive Rivalry (between existing players) — which may result in price wars, mergers, acquisitions, etc.

An additional competitive force worthy of note identified by Tony Grundy is “industry mindset.” This includes the perceptions, expectations and assumptions about the competitive environment, the level of “expected” financial returns and the factors critical for success in the industry. Industry mindset is at one level easy to discern by reading the trade press, attending conferences and searching the web and newswires. For example, the industry mindset in the computer industry has been for some time to double the speed and halve the cost of personal computers every 18 months. This leads to certain industry expectations, affects the design and production goals of industry players, and also leads many people to expect to replace computers every two years. In the 1950s and 1960s, US cars were so badly made (and that was “acceptable” to the industry mindset) that many people replaced their cars every two to three years as they fell apart. Now, improvements in the automotive industry brought about first by Japanese, Swedish and Ger-man car manufacturers who had a different mindset (called the “quality and durability mindset”) make replacement of new cars within two years less common. In fact, the financing of new cars has been extended from three year financing to five and six year financing available today.

Tool Number 5—Flexibility/Innovation Analysis

Another new strategic planning tool, developed by the author, analyzes the ability and willingness of a company, non-profit organization, governmental agency or educational institution to be flexible in its operations and to innovate. The process, called the “flexibility/innovation analysis,” is growing in relevance as business models are replaced and refined more quickly than at any time in history. Often the ability of a company or non-profit organization to compete successfully rests with its ability to be flexible and innovate rapidly.

This analytical device must be tailored to each particular organization being studied. Templates will be developed over time to assist the researcher/futurist in having a starting point for questions that can yield a successful analysis. The basic procedure for the flexibility/innovation analysis is as follows: list the major activities that the subject organization does and break down major activities into component parts; and rate the organization on each activity (or its component parts) for flexibility/willingness to innovate on that matter using a scale of 1 to 10, with 10 being the most flexible/most willing to innovate. No matter what the activity is, a score of less than five could spell doom to an organization in a highly innovative environment and be a source of competitive disadvantage, especially if competitors are willing to be more flexible/innovative in this area.

This analytical tool makes strategic planning as used by futurists and strategic planners potentially very revolutionary. The flexibility/innovation analysis can get into as much detail as one likes in brea-king down operations (such as, “how exactly are paper clips bought?”) or can focus on major aspects of an organization such as “how are major decisions made?” This process can and does question everything. A list of questions one might want to employ as a starting template in this analysis involve determining how flexible and willing to innovate a subject organization (be it a business, non-profit organization, government agency or educational institution) is in the following areas:

  • Changing office locations or internal office physical structures
  • Instituting telecommuting policies
  • Allowing employees at all levels to form strategic planning teams
  • Being willing to take risk
  • Entering into strategic partnering/joint venture arrangements
  • Modifying the basic business model to promote high growth
  • Discontinuing work habits/work procedures that
    employees do not like
  • Investing and using state of the art technology
  • Doing business in a foreign country
  • Changing salary levels and benefit levels to reward certain types of behavior not previously rewarded
  • Introducing new products/services
  • Treating customers in a new way
  • Treating employees in a new way
  • Raising capital through new means
  • Undertaking completely new marketing approaches
  • Revising the organization chart
  • Creating new metrics of “success” for the organization and its employees
  • Redefining who its stakeholders are
  • Replacing employees who are not performing well.

Tool Number 6—Stakeholder Analysis

"Stakeholders,” as the term is used by futurists and strategic planners, must be broadly defined due to the rapid dissemination of information, the broaden-ing of interests of organizations and individuals in matters that affect them, and the ability of disparate groups to mobilize resources to impact on the future. Stakeholder analysis is the systematic identification of key stakeholders and appraisal of their influence and posture towards the bringing about of a particular future. Stakeholders are those persons and organizations interested in and capable of significantly contributing to or creating barriers to a particular position or point of view regarding the future. Stakeholders have political power or influence, and understanding which side of the fence (and how strongly on one side of the fence or the other) each major stakeholder or group of stakeholders is can be essential for a futurist/strategic planner to grasp fully where the expected future lies.

Today, futurists, in predicting the future, must determine who the stakeholders are, both for and against a particular future scenario, and take their views into account in assessing what type of future is likely. When a futurist is assisting an organiza-tion or government entity in trying to create a particular future, the futurist has a duty to sort out all of the key stakeholders and, if resources exist, secure their in-depth views on the futures that they would most like to see, and are willing to support or oppose. One large-scale example of how the role of stakeholders will shift in the future is that in many companies, educational institutions and non-profit organizations, the senior man-agement will be required to consult employees on the future direction of their organizations. This is due to the power shift from companies to workers resulting from low unemployment and the corresponding high demand for most types of workers who can vote with their feet and be employed tomorrow by a competitor, usually for a higher salary or signing bonus.

Tool Number 7—PEST (Political, Economic, Social and Technological Forces) Analysis:

This qualitative analytical tool is straightforward. Futurists have long used the PEST analysis in a form called “environmental scanning.” Every serious strategic plan or effort to assist an organization in either predicting the future or significantly impacting the future should list political, economic, social and technological factors that can come into play in promoting or working against an organization reaching its desired objective or some “expected” future. When a futurist wants to gain an understanding of the likely future that an industry, trade group or organization faces, this analytical tool can shed great light on gaining insights into the future from a non-advocacy point of view.

With the dramatically changing face and role of both technology and of government itself, this area of analysis has become both complex and critical. The PEST analytical tool requires that each area be given careful attention. Literature reviews, trade press reviews, interviews and other basic research techniques, including statistical analysis, can yield significant insights regarding each of these forces and how they will affect an organization or industry’s future.

Tool Number 8—Growth Drivers

After deploying one or more of the seven stra-tegic planning tools listed above, a next step would be to look at the growth drivers or growth brakes in an industry or organization. What drives a market? What drives the growth internally in an organization? What drives customers to your company or a competitor to buy goods or services at the established prices? What drives prices up or down? What will drive future customers and changes in market behavior? The counterpart to growth drivers is called “growth brakes.” Examples of growth brakes include the answers to the following questions: What holds back a market or causes a market to decline? What retards growth internally in an organization? What limits the size of the total market of customers and buyers both now and in the future? What limits an organiza-tion’s present or future market share?

This analytical tool is just as applicable to any nonprofit organization, agency or educational institution (as are the others) to a for-profit company or industry as a whole. What will drive future contribu-tions, grants, and entrepreneurial revenues for non-profit organizations is a critical question. What will drive up applications (in terms of quantity and quality of students) to a particular school or type of school? What will drive successful recruitment of new faculty, employees, a CEO, board members, vendors or suppliers? What gives a product or an entity legitimacy, authority and accep-tance by the general public? Today, as government agencies are grappling with the question of how to count votes accurately, this issue of legitimacy, authority and acceptance has become critical because the proper and rapidly-agreed-upon election of office holders is a key growth driver for government itself.

External growth drivers often include:

  • Service innovation
  • Technology innovation
  • Increased learning/acceptance/awareness of a product/idea/ business model
  • Price reductions
  • Product improvements
  • Safety or security improvements
  • Scarcity of substitutes
  • Changing perception of time (driving the convenience factor in industries)
  • Changing fashion.

External growth brakes include:

  • Shortages of skilled labor
  • Shortages of low-priced alternatives to high-priced supply chain elements
  • Lack of certainty in governmental policy and future regulations
  • Lack of capital or high interest rates, etc.
  • Disputes over the validity of contracts, ownership rights, electoral results, ethics and antitrust issues
  • Lack of “leadership capital” or industry standards
  • Lack of international scope of expected future efforts.

Internal growth drivers include:

  • Growth “maniac” as the CEO or Chairperson of the Board
  • Organization culture that demands being number one or two in an industry or getting out (the “GE” Model)
  • Excellent training, human capital development philosophy.

Internal growth brakes include:

  • Lack of growth planning and strategic planning
  • Lack of vision
  • Lack of mechanisms to enter into and exit from strategic partnering relationships
  • Strikes, employee discontent, burnout, turnover.

Analyzing growth drivers and growth brakes can highlight future opportunities or limits that may not be revealed using other analytical tools.

Tool Number 9—Scenario Planning and Visualization

Scenario planning and visualization are actually different tools, but we are combining them since they fit together so well. Scenario planning, developed by Royal Dutch Shell and other major corporations, is the simple to sophisticated study of the present and recent past environment coupled with the use of “what if” questions to develop a set of futuristic pictures of reality or a set of planned behaviors designed to achieve a futuristic objective. The more detailed information one can analyze about the present and recent past, combined with the more detailed “what if” questions one can ask, answer and organize in an ordered, cumulative manner, the more sophisticated the analysis and more robust the results obtained will be from scenario planning. Scenario planning via diagrams, flow charts, computer simulation, computerized map-ping and the old pencil and paper method can improve strategic planning efforts by allowing the futurist/strategic planner to see the interrelationships that exist as one type of “future” or scenario plays itself out as compared to another type of “future” or scenario.

Scenario planning, if done well, can set out a reasonable, fact-based, research-intensive, comprehensive picture of the future relevant to a particular organization or industry. It looks at the future like a video, taking one frame or time period at a time, with each time period building on the cumulative results of the previous time period. Scenarios are greatly influenced over time by key transitional events that are envisioned by the futurist or strategic planner that combine to create a predicted future pattern of events. Since key transitional events are difficult to predict with any certainty, often a futurist or strategic planner will construct three scenarios of the future (optimistic, neutral and pessimistic) and then attach probabilities to each of the scenarios identified as projections of future states.

A major value of scenario planning is that it allows organizations to create strategic plans and actually set up budget and financial models that are consistent with each of the potential scenarios, thus allowing them to leverage great value and “preparation capital” out of their view or views of the future. In order for scenarios to be of benefit to businesses or non-profit organizations, the scenario builders must take into account the interrelationships of many unpredictable factors such as technology, govern-ment policies, personal atti-tudes, economic and political trends, life style changes, changes in relative economic costs and personal values in areas that can affect an organization’s future and the future economic viability of its products and services. Today, with new information technolo-gy, there are cost efficient, reliable ways to include inputs from large numbers of people to contribute insights into the scenarios that are developed about the future.

In addition, another approach to using scenario planning is for the scenario planning effort to serve as a direct support tool for specific, short- or long-term deci-sion making. For example, one could construct three scenarios that say, “If we accomplish ‘x’ by ‘y’ date, we will then implement ‘z’ plan. But if we accomplish ‘a’ by ‘b’ date, we will implement ‘c’ plan. And if we accomplish less than (or greater than) ‘x’ or ‘a’ then we will not do ‘z’ or ‘c’, but will go in a completely differ-ent direction (and spell this out in detail).” This action-oriented scenario planning is coming “on line” with XML-based decision support systems and the use of other computer- based information technology modeling.

Visualization is the “seeing” of an event before it actually occurs. Jack Nicklaus said that he had never hit a golf shot without first visualizing exactly how and where he wanted the ball to go and that he had never “missed ” a shot in his head before attempting it “for real.” A composer, when he was asked if he had ever heard his greatest symphony played perfectly, responded by saying, “Yes, when I composed it.” There is a grow-ing literature on methods and techniques used to develop strong “visualization” skills and to apply this tool to the strategic planning process and future studies. This tool will become more “mainstream” for both futurists and strategic planners.

Tool Number 10—SWOT (Strengths,
Weaknesses, Opportunities, and Threats) Analysis

Possibly the most popular analytical tool used by the graduates of Masters in Business Administration pro-grams and strategic planners today is the SWOT analy-sis. It is usually per-formed with an organization as the unit of analysis, but can be performed at the industry or even country level. This tool is listed last because it builds on the information uncovered using the tools described earlier. Using this analytical tool first, or as the only analysis tool, often yields far too little informa-tion to be very worthwhile to organiza-tions. Employing many of the analytical tools before performing a SWOT analysis greatly improves the chances of predicting accurately a future state of affairs and in developing robust, successful future-oriented strategies for particular organizations to achieve their desired future.

How does an organization identify strengths, weaknesses, opportunities and threats in a systematic way? First, strengths must be based on the organi-zational, human and technical capabilities of an organization, have the full political support of key stakeholders of an organization, and be in clear alignment with an organization’s core mission. Identifying weakness calls for frank, open-minded discussion and analysis by all key stakeholders and informed observers of the organization and a keen sense of the competitive environment. Opportuni-ties must be easily identifiable and must have a relatively short time frame and clear path to success for inclusion. Threats must be carefully analyzed because one can make two kinds of mistakes here—not recognizing a threat, or identifying something as a threat that really poses no significant danger nor increases risk substantially to the organization or industry.

The SWOT Analysis is a cumulative approach that will promote the creation of a picture of a particu-lar organiza-tion relative to its competitors and the overall environ-ment (the “rugged landscape”) in which it operates. A fuller discussion of how to perform an in-depth SWOT analysis is available in most MBA textbooks. Generally, the SWOT analysis is performed using consultants, internal strategy-oriented managers and, on occasion, rises to the board of directors' level. With today’s information technology, sending structured surveys to employees, stockholders or other stakeholders, plus other informed observers including vendors, suppliers and customers, can allow hundreds, if not thousands, of people to provide worthwhile insights into strategic planning systems in general, and in performing SWOT analyses, in particular.

CONCLUSION

These strategic planning and analysis tools work for futurists as well as shorter-range strategic planners (the “next quarter folks”). When used in an advocacy content, these tools focus not only on predicting the future, but also on helping an organization develop its capacity, identify and garner resources, and make the commitment to reaching its desired goals, within a specific time frame and budget. When used to gain insight on a non-advocacy, research basis, they can shed considerable insight into the likely future that will occur within a given time frame in an industry or even a country.

With the current “compression of time,” these tools can yield useful data quickly and at a reasonable cost. More importantly, with today’s information technology revolu-tion, they can be used to secure important, structured infor-mation from rank and file employees, supply chain vendors, strategic partners, customers, informed observers and stockholders/members who have often been left out of the strategic planning efforts in the past. Due to this information technology revolution, strategic planning systems of the future can be more democratic, more inclusive and produce better, more reliable, more robust information in a shorter time frame, and at a lower cost than the old “horse and buggy” strategic planning systems we used just before the turn of the century.

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© 2007 Herb Rubenstein Consulting